Digital Garage, Inc.
FYE June 30, 2014 Financial Report
2014.8.13

Table of Contents
Mission and Business Model・・・・・・・・

3

Investment Highlights・・・・・・・・・・・ 10Group Financial Performance Review・・・

13

Segment Performance Review・・・・・・・ 21
Appendix・・・・・・・・・・・・・・・・・・ 40

Copyright © 2014 Digital Garage, Inc. All Rights Reserved2Mission & Business Model

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

3Corporate Mission
As aDigital Garage creates
innovative business context
for the new Internet age andprovides unique businesssolutions for new lifestyles,
society, and industries bylinking
Real & Cyber
Local & International
Marketing & Technology
Present & Future
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

4

Business Model
Producing and incubating Internet businesses by optimizing
our 3 core strengths: IT, MT, and FTInformation
Technology
MarketingTechnology
Financial
Technology

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

5Enabling Platform For DG’s Incubation Model
DG continues to incubate and develop unique Internet services
through its Enabling Platform since the early days of the Internet

Ⅰ

Ⅱ

Ⅲ

Portal/Search

e-commerce/
Destination Site

Social Media

1995-2000

2000 -

2008 -

Advertising

Payment
環亞智富有限公司
HKEx:1390

Advertising / Promotion

Big Data Businesse-Commerce / Online Settlement Platform

Enabling Platform - 2 Revenue Sources
Copyright © 2014 Digital Garage, Inc. All Rights Reserved6

DG’s Mid-Term Concept/Slogan

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

7Mid-Term Global Strategy

Three HQs
Hong Kong

Tokyo

Payment Segment HQ

DG Group HQ

San Francisco
Incubation Center
Agile Development HQ

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

8Incubation Stream
Functions and collaborations of the 3 headquarters connecting
US, Japan, and Asia

Strategic support to Asian expansion
Developing new media andtransferring expertise
Investing in each country for
incubation

Development and M&A in new
business fields
Localization of foreign services

Approaching latest media
Investment and acquisitionof cutting-edge technologies
Development / marketing

San Francisco
New York
BostonCopyright © 2014 Digital Garage, Inc. All Rights Reserved

9Investment Highlights

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

10Investment Highlights
Ordinary income grew +44% YoY; Record high for the third consecutive year
～ Maintaining positive momentum through FY15 for +50% YoY growth on ordinary income ～

Ⅰ

Ⅱ

Ⅲ

Incubation : Launching investment ecosystem globally

Opened an incubation space, DG717, in San Francisco

Significant revenue/profit growth due to favorable international and domestic stock market

Capital and business alliance with a NYC-based startup studio, Betaworks

Marketing : Online Ads’ continued positive performance; launched Big Data business

FY14 sales grew +34% YoY, operating income grew +81% YoYSignificant sales/profit growth led by ROI-focused performance ads

BI.Garage (JV with Dentsu) launched sale of its big data product, BIG MINING

Payment : econtext ASIA’s IPO at Hong Kong Stock Exchange (HKEx : 1390)


Steady domestic growth resulting from expanding e-Commerce market



Accelerating the expansion of payment settlement and e-Commerce-related services to Asia

Launched econtext ASIA EC Fund to promote growth of e-Commerce businesses in Asia

Copyright © 2014 Digital Garage, Inc. All Rights Reserved11Track Record For DG Group’s Growth
Achieved Net Sales of 33.7 Billion JPY and Ordinary Income of 4.4 Billion in FY14

〜 Further Growth for the Final Year of Lean Global 〜
FY12
Net Sales
Ordinary Income
Net Sales(B JPY)50’12.12

Capital andbusiness alliancew/ Dentsu

30
20’13.11Opened
DG717’12.4
Acquired
Veritrans

40

2.7

’14.4
LaunchedBIG
MINING

Ordinary Inc.
（B JPY）’13.12
econtext
ASIA’s
IPO

6.7

4

3.0

2

10
0

8
6

4.4

FY12
Actual

FY13
Actual

FY14
ActualFY15
Forecast

Note: * Tabelog’s Monthly users (unique users) in June, 2012/2013/2014

Investment
Balance

0

Ad
Sales

Payment
Transaction
VolumeFY13

FY14

Investment balance (book value) grew to 9
billion JPY through average 2 billion JPY perannum investment

2.1

2.9

8.6

( B JPY )Performance ads sales achieved average
growth of 70% and reached to 10 billion JPY

3.2

5.6

9.5

( B JPY )Annual transaction volume exceeded 800
billion JPY

182.5

735.5

817.3
( B JPY )Monthly group-wide users surpassed 100
millionKakaku.com
Group Users

Tabelog’s Monthly users*

34.6

46.16

56.61
(million)

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

12Group Financial Performance Review

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

13

FY14.6 Consolidated (Cumulative) P/L Summary
YoY Sales grew +21%, Op income doubled, Ordinary income grew +44%

～ Achieved Op income of 2.6 B JPY and Ordinary income of 4.4 B JPY, hitting record high ～JPY in Million

Net sales
Incubation
Marketing
Payment
Operating Income
Incubation
Marketing
Payment
Non-operating income
Investment profit on equity method

Non-operating expenses
Ordinary Income
Extraordinary income
Gain on sales of subsidiaries and affiliates' stocks

Extraordinary loss
Income before income taxes
Income taxes
Net Income
EBITDA

FY13.6

FY14.6

Ratio（Full Year Act） （Initial Forcast）（Full Year Act）

27,964
2,509
11,043
14,412
1,322
290
472
1,303
2,179
1,361
423
3,078
1,304
1,131
168
4,215
1,510
2,715
5,900

32,0005,000
12,00015,000
1,800
1,100
650
1,150

3,500

2,100
4,800

33,751
5,475
14,822
13,454
2,608
1,645
854
1,201
2,307
1,741
472
4,442
630
38
5,035
1,887
2,847
6,607

(YoY %)

+21
2.2 x
+34
-7
2.0 x
5.7 x
+81
-8
+6
+28
+12
+44
-52
-77
+19
+25
+5
+12

Note: Interest expense, depreciation, and amortization are added back to income before income taxes to calculate EBITDA.
Op income per segment is based on figures prior to elimination or group deduction.

（Act vs Fcst %）

+5
+10
+24
-10
+45
+50
+31
+4

+27

+36
+38

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

14Half-year comparison of Consolidated Sales/Op income
YoY Sales grew +21%, Op income doubled～ In ream terms*, sales grew +30% YoY, Op income grew 2.4 x ～(JPY in Million)【Net Sales】

YoY +21%24,00020,000FY14.6 33,751

Adjustment for changeof fiscal term
Net sales

18,128

FY13.6 27,964

15,622

16,00013,846

2,400

2,000

YoY 2 x

14,118

FY13.6 1,322
1,318

1,200

849

812

2H
下期

1H
上期

800

6,297

472

11,866
4,000

400

0

0

1H
上期

1,795

Operating income

8,606
8,000

FY14.6 2,608

Adjustment for changeof fiscal term

1,600

1,980

12,000【Operating Income】

2H
下期

2012.6期
FY12.6

1H
上期

2H
下期

2013.6期
FY13.6

1H
上期

2H
下期

2014.6期
FY14.6

302

223
249

1H
上期

2H
下期

2012.6期
FY12.61H
上期

2013.6期
FY13.62H
下期

2014.6期
FY14.6Note : FY13.6 actuals include the effect of an irregular 15-month reporting period, due to the fiscal year end shift from March to June for consolidated VeritransGroup. 9 months for 1H, 6 months for 2H* Ream terms defined as comparison excluding the additional three months - adjustment for the fiscal year end change

Copyright © 2014 Digital Garage, Inc. All Rights Reserved15

Half-year comparison of Incubation Performance
Achieved strong sales and op income growth from the sales of stocks
due to favorable market conditions～ YoY Sales doubled, Op income grew about 6x, investment balance reached about 9 B JPY ～(JPY in Million)【Net Sales】【Operating Income】
1,600

3,500

1,381

3,081
3,000

2,394

2,500

2,010

2,000

800

1,761

1,500
1,000

1,174

1,200

400

471

2H
下期

1H
上期

250

748

600

0

500
0

▲ 202

▲ 400

1H
上期

492

2H
下期

FY12.6
FY12.62012.6期

1H
上期

2H
下期

FY13.6
FY13.62013.6期

1H
上期

2H
下期

FY14.6
FY14.62014.6期

1H
上期

2H
下期

FY12.6
FY12.62012.6期

1H
上期

FY13.6
FY13.62013.6期

2H
下期

FY14.6
FY14.62014.6期

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

16Half-year comparison of Marketing Performance
Growth gaining traction in ROI-focused performance ads～ YoY Sales increased 34%, Op income increased 81% ～(JPY in Million)【Net Sales】【Operating Income】

9,000

8,196

8,000

5,930

6,000

4,712

5,000
4,000

519
500

6,625

7,000

600

400

5,113

300

3,845

335
282
228

3,000

249

223

200

2,000

100

1,000
0

0

1H
上期

2H
下期

FY12.6
FY12.62012.6期

1H
上期

2H
下期

FY13.6
FY13.62013.6期

1H
上期

2H
下期

FY14.6
FY14.62014.6期

1H
上期

2H
下期

FY12.6
FY12.62012.6期

1H
上期

2H
下期

FY13.6
FY13.62013.6期

1H
上期

2H
下期

FY14.6
FY14.62014.6期

Copyright © 2014 Digital Garage, Inc. All Rights Reserved17Half-year comparison of Payment Performance
Decrease in both net sales and op income due to the burden of HK IPO costsin addition to the change in fiscal year end～ Achieved net sales growth of 8% and op income growth of 11% YoY in real terms* ～(JPY in Million)【Net Sales】

10,000FY13.6* 12,432

YoY +8％2014.6 13,454

7,984

8,000

1,980 6,428 6,603

6,850

YoY +11％1,000

FY13.6* 1,080
789

800

738

600

4,000

400

1,851 1,883

2014.6 1,201

223

6,000

2,000

【Operating Income】

6,004

514

282

268

463

566

200

Adjustment for change of fiscal term

Adjustment for change of fiscal term

Net sales

Operating Income

0

0

1H
上期

2H
下期

FY12.6
FY12.62012.6期

1H
上期

2H
下期

FY13.6
FY13.62013.6期

1H
上期

2H
下期

FY14.6
FY14.62014.6期

1H
上期

2H
下期

1H
上期

FY12.6
FY12.62012.6期

2H
下期

FY13.6
FY13.62013.6期

1H
上期

2H
下期

FY14.6
FY14.62014.6期

Note : * Ream terms defined as comparison excluding the additional three months - adjustment for the fiscal year end change
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

18

FY14.6 Consolidated B/S Summary
JPY in Million

FY13.6

FY14.6

Difference

Reason for change / Remarks

Current assets

33,83745,455+11,618

Cash and deposits

15,32924,294+8,965

Receivables

9,037

8,596

-441

Money held in trust

3,768

889

-2,879Payment segment related items (Business day factor)

Operational investment securities

2,641

8,063

+5,422

Fixed assets

22,17325,554+3,381Mark-to-market for listed stocks, etc

Investment securities

5,521

10,644+5,123

Investment real estate

3,102

3,619

+517

Goodwill

9,968

7,354

-2,614

Total assets

56,01071,009+14,999

Current liabilities

21,801

25,461+3,660

Deposits

18,22916,434-1,795

Short-term borrowing

305

3,690

+3,385

Deferred tax liability

13

1,264

+1,251

Fixed liabilities

6,950

9,058

+2,108Long-term borrowing

6,799

8,841

+2,042

Total liabilities

28,752

34,519+5,767

Net assets

27,25836,489+9,231

Shareholders' equity

25,27927,762+2,483Retained earnings

7,003

9,615

+2,612

Accumulated other comprehensive income

426

2,679

+2,253

Unrealized gains on securities

31

2,193

+2,162

Minority interests

1,468

5,906

+4,438

Liabilities / Net assets

56,01071,009+14,999

Financing - IPO of econtext ASIA, etc
Payment segment related items

Increased investment profit on equity
method etc
Decreased stake in econtext ASIA
upon the listing

Payment segment related items
Demand for working capital
Increased due toMark-to-market
Demand for working capital

Unrealized gains after tax
Increased upon the listing of
econtext ASIA

Unrealized
gains

Copyright © 2014 Digital Garage, Inc. All Rights Reserved19Forecast for June 2015
Forecasting growth of : Sales 20%, Op income 73%, Ordinary income 50%～ Incubation to drive the growth, Marketing to grow steadily ～FY13.6

FY14.6（Full Year Act）

（Full Year Act）

Net sales

27,96433,75140,000+19

40,000

Incubation

2,509

5,475

7,500

+37

7,500

Marketing

11,043

14,822

17,000+15

12,500

Payment

14,412

13,454

15,500+15

20,000

1,322

2,608

4,500

+73

6,500

Incubation

290

1,645

3,600

2.2 x

3,500

Marketing

472

854

1,100

+29

1,500

Payment

1,303

1,201

1,450

+21

3,000

3,078
2,715

4,442
2,847

6,700

9,000
6,200

6,607

4,000
9,000

+51

5 Yen ※

5 Yen

7 Yen

JPY in Million

Operating Income

Ordinary Income

Net Income
EBITDA
Dividend per Share

5,900（Ordinary
Dividend（Ordinary
5 Yen） Dividend

5 Yen）

FY15.6（Full Year
Forecast）

FY15.6(YoY %)+40+36（Mid-Year Plan）
Published Aug 2012

10,000（Ordinary Dividend
5 Yen）（Commemorative Dividend 2 Yen）

※ Conducted stock split of 1 :200 in Oct 1st, 2013. Calculated dividend of FY13.6 assuming there was the stock split
Op income per segment is based on figures prior to elimination or group deduction.
Copyright © 2014 Digital Garage, Inc. All Rights Reserved-

20Segment Performance Review

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

21

DG Group’s Business Segment
Accelerating Lean Global Through 3 Business Segments

Ⅰ

Incubation Segment

Global Incubation of next-generation Internet businesses

INCUBATION

Investments to cultivate promising startups
Development of media
Technological & business development based on agile
development methodology

ⅡMarketing Segment

Provider of web ads and latest marketing technologies

MARKETING

Data science businessWeb advertisement, media business
O2O related, business development

Ⅲ

Payment Segment

One of the Asia’s largest payment platforms

PAYMENTOne of the largest online payment
service providers in Japan
Expansion of payment platform to Asia

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

22Incubation Segment
Ⅰ

Incubation Segment
Net Sales

Operating Income

FY13.6

Full Year Actual

2,509 M JPY

290 M JPY

FY14.6

Full Year Actual

5,475 M JPY

1,645 M JPY

FY15.6

Full Year Forecast

7,500 M JPY

3,600 M JPY➤ DG Incubation, Inc.

Invests in and incubates cutting-edge Internet startups➤ Open Network Lab, Inc.

Internet-business seed accelerator for entrepreneurs with global visions➤ Digital Garage US, Inc.

The US-based global strategy headquarters➤ Neo Innovation, Inc.

Provides agile software development solutions and lean start up methodology➤ New Context Services, Inc.

Provides unique disruptive solutions around data integrity➤ CIWorks Inc.

Operates website to provide knowledge services in medical field
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

23Incubation Segment – Business Concept
Incubation Ecosystem within the DG Group
Maximizing investment return through the global incubation platform where DG invests in andprovides development and business support to portfolio companies at each growth stage

MIT
Media
Lab

Top notch mentors andglobal development
environment

Experience in
Incubation businessfor over 20 years

Sourcing
Investment

Business
Development

Agile
Development
Hands-on, leveraging
Future Lab
Enabling Platform（Advertising・Payment）

Beta
works

Agile development andLean startup methodology
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

24Incubation Segment – Business Strategy
Seamlessly integrating the Import model with the Export model
Utilizing global agile development network and SF Incubation Center
Establishment of omnidirectional incubation model
Import Model

Export Model・Incubating promising startups globally・Supporting localization of foreign ventures

・Investing in promising domestic startups
・Supporting global expansion of Japanese
Lean Global companies

Exit

Media Lab Fund
Investing in ventures of eachstage globally

M&A

Early
Seed

Collaboration
with DG717

Middle –Later

Incubating promising seedstage Japanese ventures
http://onlab.jp/

Utilizing agile
development
network

Accelerate Global Incubation
Copyright © 2014 Digital Garage, Inc. All Rights Reserved25

DG Incubation - Highlights
Strengthened and expanded global portfolio pipeline
Accelerating incubation of portfolio companies through close collaboration with Marketing and Payment Segments

Current Portfolio
Category

Portfolio companies IPOs in FY2014

NumberBook Value ( M JPY )Equity（incl. CN）

77

8,208

Domestic company

20

4,385

Overseas company

57

3,822

Fund

5

486

Total

82

8,694

Note : Mark-to-market as of quarter end for listed stocks■Distribution by sector （equity/ incl. CN）（2013.11 NYSE）

Major Portfolio Companies※
AdStage, Inc.
[Foreign]

AnyPerk, Inc.
[Foreign]

Provides intelligent
cross-social-media
advertising platform.

Provides employee
perk packages to SMB.

Bengo4.com,
Inc.

CrowdWorks Inc.
[Domestic]

Japan’s largest
portal site forlegal counsel.

Operates a crowdsourcing service tofreelance engineers
and creators.

GoodpatchInc.[Domestic]iRidge,Inc.
[Domestic]

Web development
and consulting
service firm.

An O2O marketingprovider including alocation-based push
notification distribution
platform for smartphones.

[Domestic]

Company number basis

Value basis（2013.11 TSEM）※ Major portfolio includes privately-held companies that have given DG disclosure permission of which DG's investment exceeds 100 M JPY and owns aminimum 5% share as of June 30, 2014. This information is based on the information disclosed from each company, and DG does not guarantee its
authenticity, accuracy, rationality, and completeness.
Copyright © 2014 Digital Garage, Inc. All Rights Reserved26

US Highlights
Strengthening ties to Silicon Alley in addition to Silicon Valley～ Accelerating global incubation connecting US, Japan, and Asia ～West Coast (San Francisco)■ Full launch of incubation space connecting
Silicon Valley and Asia
・Co-working space
・Events and workshops
・Global mentorship

East Coast (NYC, Boston)■ Capital and business alliance with NYCbased leading startup studio, Betaworks
・Mutual introduction of promising startups
・Accelerating incubation in Japan and Asia
・Localizing US business for Japan market
Diverse Portfolio■ Assisting startups and national
clients with agile development
and UX/UI expertise

MIT Media Lab■Focusing on services
related to the growing
data security market■ Accelerating R&D on cutting-edge media
and digital technologies
・Open-data utilization project・Media Lab Fund

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

27

Open Network Lab - Highlights
Established Onlab brand as the leading Japanese seed accelerator program
・Nurtured 45 teams / 180 entrepreneurs and engineers in 4 years since launch・Launched events and programs for SF/Asian expansion→ Hosted DG717「Open Network Lab Global Pitch」in Nov ’13, 「FailCon Japan」in Jun ’14, etc

Portfolio as of June, 2014
（ Showing part of portfolio only ）Copyright © 2014 Digital Garage, Inc. All Rights Reserved

28Marketing Segment
Ⅱ

Marketing Segment
Net Sales

Operating Income

FY13.6

Full Year Actual

11,043 M JPY

472 M JPY

FY14.6

Full Year Actual

14,822 M JPY

854 M JPY

FY15.6

Full Year Forecast

17,000 M JPY

1,100 M JPY➤ DG&Ibex company

Supports client’s business through performance-based ads, Online to
Offline strategy and web marketing➤ BI.Garage, Inc.

Develops and provides ad products incorporating data science, social
marketing, and cutting edge ad technology➤ NaviPlus Co., Ltd.

Offers website support tools including personalized recommendationengines

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

29Marketing Segment – Business Strategy
Collaborating with Dentsu group to begin strategic data science business

Deeply cultivating exiting digital marketing businessand realizing growth strategy illustrated by I, II, and III below

Ⅰ

Deeply cultivating digitalmarketing business

Monetization of O2O strategy and B2C media
businesses in addition to promoting growthof web promotions and mall businesses

Ⅱ

Expanding growth ofdata science business

Gathering data and know-hows of DG
Group and Dentsu group to pioneer a newfrontier in data business

Ⅲ

Expanding each businessto Asia

Horizontal expansion of businesses to themajor Asian markets in conjunction with
Payment Segment

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

30Marketing Segment – Business Model
Realizing Japan’s #1 Performance Ad Agency and Big Data
Building Japan’s one of the largest markets on ROI-focused performance ads, unique fromother online ad agencies. Offers data-driven high-value-added scientific ad solutions

DG Group
Ⅰ

Performance adⅡAffiliate

Big Data

Build DMP (Data Management Platform)
that consolidates and analyzes data from
DG group / advertisers
Develop DSP targeting ad / CRM

Listing

Users / Audience

Advertisers

Performance ad company

TargetingInternet media

Operate ad distribution platform efficiently
Provide Trading Desk Services

DSP

Search /Recommendation

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

31

DG&Ibex - Highlights
Cumulative Results in FY14.6 (July to June)
Total sales

Number of clients

Sales per client

14.03 billion JPY

322 companies

43.56 million JPY+40% YoY+9% YoY+28% YoY

Achieved 40% YoY growth and historical high 14B Yen in sales【Growth Factors】
Growth led by ROI-focused performance ad taking
advantage of deep know-hows in digital marketing◆Solution● Affiliated marketing targeting financial and cosmetic industries continued

Sales Growth (100 M JPY)
YoY

160

+40%

120

to lead sales◆Media● Distribution value increased 34% YoY to 56.6 billion yen at Point Mall

80

140.3

● Collaborating and partnering with a membership platform with millionsof members

◆O2O

40

● Sending customers to actual storefronts based on the know-hows gained
from the mall business● Utilizing user data from major retail distributors to optimize customer
communication and realize omni-channel retailing

63.0

79.8

100.4

0
2011.62012.62013.62014.6

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

32BI. Garage - Highlights
A new business in the business intelligence field leveraging big data

DG Group, Dentsu, and Kakaku.com jointly begandata science business to optimize marketing activities< Business Overview ＞
Data from
Kakaku.com

Data from
DGG

Data from Dentsu Groupand others

Data fromsponsors
Clients datafrom sponsors
Behavior data
etc

Data
scienceview

DSP targeting ad

Latesttechnology

Coordination
with CRM area

A two-phase approach to develop the business
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

33

NaviPlus - Highlights
Further expanding customer baseas a leading
recommendation
service provider
in JapanTools
Increased
Adoptionof NaviPlus’ Comprehensive
Marketing- Installed in 600+ websites, Over 1.5 billion requests per month -NaviPlus’ Comprehensive Marketing Tools

Launch of Next Generation
O2O Solutions

Providing tools such as recommendation engines andcustom website search to increase visitor conversion
rates and to increase sales of EC stores

Omni-channel-compatible solution“Recommend Push” with NTT DATA and iRidge

Site Visits

Search/ComparePurchase

OfflineStore data
■Recommenda
tions toLeading to purchase without dropping out

EC website
data

Customers who viewed this item also viewed
Recommended products for you

customers

Location-based push
notifications to smartphones

Showcasing original product
Incorporating search and recommendation into our vertical media

Customer reviews by those who purchased
this item

Rent appraisal
application
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

34

Payment Segment
Ⅲ

Payment Segment
Net Sales

Operating Income

FY13.6

Full Year Actual

14,412 M JPY

1,303 M JPY

FY14.6

Full Year Actual

13,454 M JPY

1,201 M JPY

FY15.6

Full Year Forecast

15,500 M JPY

1,450 M JPY➤ econtext ASIA Ltd.

Payment headquarters to expand e-commerce platforms globally➤ econtext, Inc.

Integrates online and offline business as the convenience store payment pioneer➤ Veritrans Inc.

Provides leading e-commerce payment solutions➢ Veritrans Shanghai（50％ owned by econtext ASIA ／ equity method affiliated company）
Chinese JV➢ PT MIDTRANS（Veritrans Indonesia) ( 23% owned by econtext ASIA／Non-consolidated）
Indonesian JV➢ Citrus Payment Solutions Pte. Ltd（ 15.59%／Investment ）The holding company for the Indian online payment solutions provider( Citrus Payment Solutions Pvt. Ltd )Copyright © 2014 Digital Garage, Inc. All Rights Reserved

35

Payment Segment - Business Strategy
Further expanding payment business, upon econtext ASIA’s IPO

OfflineOnlineAchieving multi-directional strategy by expanding the settlement
expertise nurtured in Japan horizontally to Asia and to offline



Japan

Asia

STRATEGY Ⅰ

STRATEGY Ⅱ

Continued expansion ofdomestic business

Aggressive expansion to Asia

Jointly cultivating settlement business with strong
domestic partners such as shareholders, expanding
major client base, and developing new businesses



Exploring small and medium-sized EC service segment

Strengthening
industries

alliances

STRATEGY Ⅲ

withinsettlement/EC

Emerging EC Markets

→ JV



Developed EC Markets

→ M&A



China&India→ Tailored strategy

EC Fund to promote growth of e-commercebusiness in Asia

Simultaneous expansion of offline settlements toJapan and Asia

Credit Card Adoption<20% = big opportunity

LatestTechnology
New lifestylesupported bysmartphonesettlements

EC / Credit Card about to boom
Rapid smartphone adoption
being the key

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

36

Payment Business - Highlights
FY14.6 (July to June) Results
Services expanded to

Number of transactions

Total amount of transactions

4 countries

170.39 million

817.3 billion JPY

Japan, Indonesia, China, India+13.8% YoY+11.1% YoY

Accelerating business expansion upon econtext ASIA’s IPO◆ Domestic – Accelerating solution innovation &partnerships with major players【 Offline Market (mPOS) 】
 NTT West

Introduced smartphone-based
settlement solution to Flet’s Smartpay

 Tabelog

Providing card settlement
service for restaurants【 SME Market 】
 Promoting “Veritrans Air”
online payment service
targeting SME merchants【 Convenience Store O2O 】
 Receiving refunds and cash-backs at convenience stores,
enabling deposits to DOCOMO accounts, and direct sales ofJetstar air tickets at Lawson◆ Foreign – Widening Asian expansion upon IPO at HKEx
 Joint investment to major Indian settlement solution
provider Citrus with Sequoia Capital, etc
 Launched econtext ASIA EC Fund to promote growthof e-Commerce businesses in Asia
Transaction
amount ( 100 M )5,000【Transaction amount】
Veritrans

4,000
3,000
2,000

2,847

1,998

3,098

2,123

econtext
3,448

2,334

1,000
0

3,907

3,962

2,692

2,697

4,211

2,838

849

976

1,114

1,216

1,265

1,373

上期
1H

下期
2H

上期
1H

下期
2H

上期
1H

下期
2H

FY12.62012.6期

FY13.62013.6期

FY14.62014.6期

Note: # of transactions is on a gross basis. Transaction amount includes
payment amount and data transaction amount. Verirtrans's FY12 figures
included for comparison
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

37

Payment Business – Entering into New EC BusinessElectronic payment to become a 66 trillion JPY market by 2017 as stores adopt cashless payment.
Expanding our payment service solutions while maximizing synergy with DG Group’s offerings.

【 Electronic Payment to reach66 trillion JPY in 2017】( JPY in Trillion )Electronic Payment
66 Trillion JPY(1.5 x)

Focus areas(market size)

Food
service（12 T JPY）

44

(’12)

66

Private Final
Consumption
Apprx. 290
Potential = Non-electronic
payments(Cash payment, etc)

(’17)

Real
EstateRentals（9 T JPY）

DG’s Solutions

Tabelog Pay
Jointly providing credit card
settlement service for restaurants
with Kakaku.com utilizing 770
thousand restaurants listed on
Tabelog

Suma PAY
Providing credit card settlement services for rents
and deposits in conjunction with DG Group’s realestate advertising agency, DG Communications

Convenience-store-style Settlement
RetailStoresBringing convenience-store style payment
services to rapidly growing Asian market
utilizing expertise developed over years with
47,000 stores in Japan

Electronic payments (Credit / Debit / Prepaid cards, Electronic money, etc)
Source : DG research, Statistics Bureau of Japan「National Economic Accounting」, Yano Research Institute 「Electronic Payment Market 2013」
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

38

Payment Business – Asian Expansion
Accelerating Expansion of Settlement and e-Commerce Solutions to Asia
～ Actively investing funds raised at HK IPO towards Business Expansion in Asia ～Business Expansion in Asia

Japan・Established in ‘11. 15.59%
owned by econtext ASIA
・Monthly transaction volume
grew about 6x YoY to 2.5 B JPY

China

India

・Established in ‘12. 23% owned by econtext ASIA
・Monthly transaction volume grew about 20 x YoY to
700 M JPY
・Expanding settlement options to banks, convenience
store, e-wallet, etc

Hong Kong

・Established in ‘13. 50% owned by econtext
ASIA
・Provides payment settlement solutions tolocal operators of Japan and foreign-based
businesses

Indonesia

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

39

Appendix

Copyright © 2014 Digital Garage, Inc. All Rights Reserved40Quarterly Profit and Loss (Consolidated)

JPY in Million

FY13.6

FY14.6

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q

Net sales

5,307

8,539

6,482

7,636

7,273

8,349

8,271

9,857

Incubation

131

616

497

1,263

927

1,467

755

2,325

Marketing

2,364

2,748

2,825

3,104

3,068

3,557

4,012

4,184

Payment

2,810

5,174

3,158

3,269

3,277

3,326

3,503

3,346

Operatingincome

△ 51

523

151

698

86

726

374

1,421

Incubation

△ 258

56

△ 20

512

△ 77

548

△ 48

1,222

Marketing

129

120

55

167

136

199

308

210

Payment

308

480

253

260

203

260

415

322

Ordinary
income

167

1,000

719

1,191

473

1,214

810

1,944

Net income

213

700

1,294

507

389

1,037

446

974

EBITDA

696

1,573

2,050

1,581

970

1,956

1,207

2,473

200

333

211

195

191

204

170

191

Amortization

Note: Interest expense, depreciation, and amortization are added back to income before income taxes to calculate EBITDA.
Op income per segment is based on figures prior to elimination or group deduction.
Copyright © 2014 Digital Garage, Inc. All Rights Reserved

41

Press Releases
Date

Time

2014.04.28

Digital Garage to Launch CIWorks to Provide Specialized Cancer Treatment Knowledge

2014.04.16

Open Network Lab Begins Accepting Applications for the 9th Batch of its Incubation Program

2014.04.10

BI.Garage Launches "BIG MINING" Ad Product Utilizing Digital Garage Group's Big Data

2014.02.13

Digital Garage to invest in and partner with US-based Internet studio Betaworks

2014.01.07

Digital Garage expands its incubation business in Asia by investing in Indonesia's major online babyproduct retailer Bilna

2013.12.25

Digital Garage's econtext ASIA forms capital business alliance with TIS to jointly promote solutions to eCommerce businesses in Asia

2013.12.25

Digital Garage's econtext ASIA invested in the major Indian online payment solutions provider Citrus

2013.12.19

Digital Garage's econtext ASIA becomes listed at the Hong Kong Stock Exchange

2013.12.05

Digital Garage's subsidiary econtext ASIA to be listed on the Hong Kong Stock Exchange

2013.11.06「Kakaku.com」and VeriTrans forms alliance to provide overseas delivery service

2013.11.01

Digital Garage Opens a Startup Incubation Center in San Francisco to Accelerate Investment Business on
a Global Scale2013.11.01

Digital Garage and Neo Innovation Launching New Context Services

2013.11.01

Data Science Business to Be Launched by JV

2013.09.20

New Context Services, A Neo Innovation Company, Announces Alliance with Guardtime to Help Deliver
Authenticated Data

2013.08.12

econtext ASIA's subsidiary, VeriTrans, launched a smartphone-based payment service, VeriTrans mPOS

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

42

Press Releases
Date

Time

2013.08.01

Digital Garage and Dentsu to establish a joint venture, Dentsu ScienceJam, to commercialize results oflatest scientific research

2013.07.29

Notice of Consolidated Subsidiary Company's Listing Application to Hong Kong Exchanges and Clearing
Limited2013.07.23

CGM Marketing to accelerate its acquisition of advertiser and publisher clients for the Kiip smartphone
advertising and reward platform2013.07.09

CGM Marketing to accelerate the expansion of Kiip, a smartphone advertisement and rewards technology,
to convenience stores, bringing O2O solutions to national chains2013.07.02

Digital Garage Forms Business Alliance with Credit Saison

Copyright © 2014 Digital Garage, Inc. All Rights Reserved43

US Incubation Center Launch (1/2)
Officially launched an incubation center connecting Silicon Valley and Asia
DG717 : an incubation center and an intersection
for the Eastern and Western cultures
Center of the latest incubation ecosystem○○○○○○○
Co-working
Space

○○○○
○○○

Events○○○○○○○GlobalMentorship

Agile
Development
DG717：http://www.dg717.com/

Copyright © 2014 Digital Garage, Inc. All Rights Reserved

44

US Incubation Center Launch (2/2)
DG717 Opening Event on November 5th & 6th- SF Mayor Ed Lee proclaimed November 5th to be Digital Garage Day -Copyright © 2014 Digital Garage, Inc. All Rights Reserved45

Please note that the business forecasts and strategies covered in today’s presentation are based on our current evaluation and future results may varysignificantly depending on unforeseeable events or circumstances. This announcement is solely for the purpose of the investors relationship and is not
for making any solicitation for investment in any securities. This announcement does not constitute an offer to sell or the solicitation of an offer to buy
any securities in the United States or any other jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. Any securities of our consolidated subsidiaries have not been registered under the U.S.
Securities Act of 1933, as amended (the "U.S. Securities Act") and may not be offered or sold in the United States absent registration or an applicable
exemption from the registration requirements of the U.S. Securities Act. Any public offering of securities to be made in the United States will be madeby means of a prospectus. Such prospectus will contain detailed information about the company making the offer and its management and financial
statements.